Property letting is generally a good deal for everyone. There’s a small minority of unethical landlords, of course, as well as unethical tenants who can cause problems. In general, though, the more profitable letting is to the landlord, the better choice tenants have.
Could this be changing, though? Various recent measures by the government could end up both cutting into the landlord’s profit and creating extra problems that might end up discouraging people from the buy-to-let sector.
Stamp Duty Land Tax
From April 2016, 3% will be added to Stamp Duty Land Tax for buy-to-let or second homes costing more than £40,000. Although this may not seem a huge increase, it will be applied to the full price, and the duty for a property worth £250,000 could increase from £2,500 to £8,800, perhaps pricing some landlords out of the market.
The increase applies only to individuals, not to corporations, and one solution may be for a landlord to form a limited company. This is likely to involve the landlord being liable for other taxes, though, so it’s vital to consider the position from all angles before taking the decision.
It’s important to protect tenants from rogue landlords, and with this in mind the Deregulation Bill 2015 restricts a landlord’s right to issue a section 21 notice to evict a tenant. This will protect tenants from being evicted for making legitimate health and safety complaints, but it could also make it a lot harder for ethical landlords to navigate the treacherous legal waters.
If a landlord fails to comply with the specifications of an energy performance or gas safety certificate, any section 21 notice issued will be invalid, even if unconnected with the issue (e.g. for non-payment of rent). A section 21 can also not be served during the tenancy’s first four months.
One problem is these regulations slipped out with very little publicity, and many landlords will be unaware of them. It’s essential to keep up with all new regulations and not do anything to compromise your right to legitimately reclaim your property.
Other Financial Changes
Besides the changes in stamp duty, the government is also, from 2017, putting extra tax restrictions on landlords who fall into the higher tax bracket. Again, this applies only to individuals, but that may change. They’re also replacing the 10% wear and tear tax allowance with a system allowing the landlord to claim for each individual repair or replacement, which is likely to see most landlords worse off.
Any one of these changes could make life a lot more difficult for landlords. Put together, they could drive many to sell off their letting portfolios, thus reducing the choice available to tenants. Nobody wins.
If you’re a landlord who’s worried about these changes, feel free to get in touch with me to discuss your options.